Business Succession

Fulton Tool and Die Co.

Example of Sub S ESOP Benefits

Complete buyout of a C corporation shareholder, followed by a corporate S election.

Mr. Fulton owns 100% of the shares of Tool & Die, Inc., a Sub Chapter C company worth $6 million. Mr. Fulton is getting older and would like to sell his company and enjoy the proceeds. If he sells to an outside buyer, he will pay taxes, perhaps at the 20% rate, on his net long-term capital gain. If his original basis in the stock was -0-, he would pay $1,200,000 and keep $4,800,000 after taxes.

Franklin Forge: Full Case Study

Unprofitable Subsidiary

Unprofitable subsidiaries are often offered for sale to employees. Employees should approach such opportunities with care and predicate their actions on feasibility studies conducted by skilled consultants who know when to say no to a bad idea. The feasibility and success of the Franklin Forge worker buyout depended on a number of factors including strength and skill of both the workers and management, the community's need for ht plant, the fact that the workers initiated the buyout, and the parent corporations' motivation to sell at a low price and make the deal work.